0001554859-22-000028 | 10-Q | XBRL Viewer

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Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Accrued Expenses
Compensation	$ 4,386	$ 1,754
Accrued Taxes	1,955	1,159
Miscellaneous Accruals	312	523
Total Accrued Expenses	$ 6,653	$ 3,436

Leases - Future minimum rental payments (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Leases
2022 Remaining period	$ 22
2023	90
2024	93
2025	71
Total undiscounted future minimum lease payments	276
Less: present value discount	(10)
Total lease liabilities	266
Lease expense in excess cash payment	(13)
Total ROU asset	$ 253	$ 314

Stock Incentive Plan - Common Stock Repurchase (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022	Mar. 14, 2022
Stock Incentive Plan
Shares authorized under Share Repurchase Program			$ 20,000
Treasury stock acquired (in shares)	47,458	148,500
Cost of treasury stock acquired	$ 2,045	$ 4,991

Other Non-current assets - Additional Information Details (Details) - USD ($) $ in Thousands	1 Months Ended
	Apr. 30, 2021	Sep. 30, 2022	Dec. 31, 2021
Equity Securities without Readily Determinable Fair Value [Line Items]
ROU asset		$ 253	$ 314
Miscellaneous deposits		$ 19	$ 18
Mellitus
Equity Securities without Readily Determinable Fair Value [Line Items]
Purchase of product licenses	$ 2,000
Prepaid license purchases	$ 2,000
Renewal term of purchase agreement (in years)	1 year

Commitments and Contingencies (Details) - USD ($) $ in Thousands	Jan. 01, 2022	Dec. 31, 2021	Jul. 31, 2020
Defined Contribution Plan Disclosure [Line Items]
Lease agreement term			61 months
Retention credit		$ 1,240
Employer matching contribution	50.00%
Maximum
Defined Contribution Plan Disclosure [Line Items]
Maximum contribution of percentage of employee's eligible earnings	6.00%

Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2022

Accrued Expenses

Schedule of accrued expenses


	September 30,		December 31,
	2022		2021
Compensation	$	4,386	$	1,754
Accrued Taxes		1,955		1,159
Miscellaneous Accruals		312		523
Total Accrued Expenses	$	6,653	$	3,436

Notes Receivable (Details) $ in Thousands	1 Months Ended		3 Months Ended	9 Months Ended
Notes Receivable (Details) $ in Thousands	Jun. 30, 2022 USD ($) item	May 31, 2022 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2022 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total notes receivable			$ 1,179	$ 1,179
Aggregate principal amount				1,179
Interest income			17	20
Senior secured promissory notes
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total notes receivable			1,000	1,000
Aggregate principal amount	$ 1,000	$ 179
Number of notes receivable \| item	2
Interest rate (as a percent)	5.00%	10.00%
Term (in years)	3 years
Secured convertible promissory note
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total notes receivable			$ 179	$ 179

Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current Assets:
Cash and cash equivalents	$ 45,536	$ 37,323
Trade accounts receivable, net of allowance for doubtful accounts of $71 and $61, respectively	3,673	3,619
Inventory, net	511	550
Prepaid expenses and other current assets	1,960	4,044
Total current assets	51,680	45,536
Assets for lease, net	1,986	1,643
Property and equipment, net	635	394
Long-term investments	821	821
Long-term notes receivable	1,179
Other non-current assets	2,267	332
Long-term deferred tax assets	2,351	1,946
Total assets	60,919	50,672
Current liabilities:
Accounts payable	483	443
Accrued expenses	6,653	3,436
Deferred revenue	1,158	921
Other short-term liabilities	91	80
Total current liabilities	8,385	4,880
Long-term liabilities:
Other long-term liabilities	182	245
Total long-term liabilities	182	245
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock, $0.001 par value; 50,000,000 shares authorized; 6,879,497, and 6,824,380 shares issued, and 6,665,075, and 6,758,458 shares outstanding (treasury shares of 214,422 and 65,922), respectively	7	7
Additional paid-in capital	16,341	20,645
Retained earnings	36,004	24,895
Total stockholders' equity	52,352	45,547
Total liabilities and stockholders' equity	$ 60,919	$ 50,672

Income Taxes

9 Months Ended

Sep. 30, 2022

Income Taxes

Income Taxes

14. Income Taxes

The Company’s income tax provision for the three months ended September 30, 2022 was $926 and for the three months ended September 30, 2021 was $1,107. The Company’s income tax provision for the nine months ended September 30, 2022 and 2021 was $2,626 and $2,034, respectively. The income tax provision reflects its estimate of the effective tax rates expected to be applicable for the full year, adjusted for any discrete events that are recorded in the period in which they occurred. The estimates are re-evaluated each quarter based on the estimated tax expense for the full year.

For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the statements of operations.

The effective tax rate for the three and nine months ended September 30, 2022 was 20.13% and 19.12%, respectively compared to 21.06% and 11.46%, respectively, in the same periods of the prior year. The decrease in effective tax rate for the three months ended September 30, 2022 is primarily related to an increase of tax benefits associated with share-based compensations. The increase in the effective tax rate for the nine months ended September 30, 2022 is primarily due to lower tax benefits associated with employee stock-based compensation plans.

The effective tax rate for the three and nine months ended September 30, 2022 differed from the U.S. federal statutory rate of 21% primarily due to tax benefits associated with stock-based compensation plans, state income taxes (net of federal benefit), and federal and state research and development credit benefit.

As of September 30, 2022, and December 31, 2021, the Company had $419 and $476, respectively of unrecognized tax benefits, excluding interest and penalties. The Company’s practice is to recognize interest and penalty expenses related to uncertain tax positions in income tax expense, which was zero for the year ended December 31, 2021 and $8 for the nine months ended September 30, 2022.

On August 16, 2022, the "Inflation Reduction Act" (H.R. 5376) was signed into law in the United States. Among other things, the IRA imposes a 15% corporate alternative minimum tax for tax years beginning after December 31, 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022, and provides tax incentives to promote clean energy. The Company is still in the process of analyzing the provisions of the IRA. The Company does not currently expect the Inflation Reduction Act to have a material impact on the Company's Financial Statements.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 14
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Long-Term Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Equity Securities without Readily Determinable Fair Value [Line Items]
Long-term investments	$ 821	$ 821
Investments in Synaps Dx
Equity Securities without Readily Determinable Fair Value [Line Items]
Long-term investments	512	512
Investments in Mellitus Health Inc.
Equity Securities without Readily Determinable Fair Value [Line Items]
Long-term investments	$ 309	$ 309

Variably-Priced Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Variably-Priced Revenue (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Variably-Priced Revenue
Revenue from variable-fee licenses	$ 4,887	$ 5,847	$ 16,742	$ 18,009
Revenue from sales of hardware and equipment accessories	$ 539	$ 300	$ 1,091	$ 820

Accrued Expenses

9 Months Ended

Sep. 30, 2022

Accrued Expenses

Accrued Expenses

9. Accrued Expenses

Accrued expenses consist of the following:


	September 30,		December 31,
	2022		2021
Compensation	$	4,386	$	1,754
Accrued Taxes		1,955		1,159
Miscellaneous Accruals		312		523
Total Accrued Expenses	$	6,653	$	3,436

Condensed Statements of Cash Flows (Parenthetical)	9 Months Ended
Condensed Statements of Cash Flows (Parenthetical)	Sep. 30, 2021 shares
Condensed Statements of Cash Flows
Exercised put option of common stock in Synaps Dx (in shares)	211,928
Exercised put option for number of common stock of the company (in shares)	40,922

Other Non-current assets

9 Months Ended

Sep. 30, 2022

Other Non-current assets

Other Non-current assets

8. Other Non-current assets

Other non-current assets consist of the following for the periods presented:


	September 30,		December 31,
	2022		2021
Prepaid licenses	$	1,995	$	—
Other		272		332
Total other non-current assets	$	2,267	$	332

In April 2021, the Company entered into an agreement with Mellitus to exclusively market and distribute its product line in the United States, including Puerto Rico, except for selected accounts. The Company is currently developing a marketing plan. Under this distribution agreement, the Company agreed to purchase $2,000 of product licenses and prepaid $2,000 for the license purchases. Unless terminated early in accordance with its terms, the exclusive distribution agreement will remain in full force and effect until April 1, 2026, and thereafter there is an option for this agreement to be automatically renewed for additional one-year terms. Revenue from these product licenses will be recognized in accordance with ASC 606, Revenue from Contracts with Customers. This prepayment was reclassed to a long-term asset in the second quarter as the recoverability of the prepayment is now expected to be more than twelve months.

Other includes right-of-use asset (“ROU”) of $253 and miscellaneous deposits balance of $19 as of September 30, 2022. As of December 31, 2021, ROU asset and miscellaneous deposits balances were $314 and $18 respectively.

Notes Receivable (Tables)

9 Months Ended

Sep. 30, 2022

Notes Receivable

Schedule of notes receivable


	September 30,		December 31,
	2022		2021
Senior secured promissory notes	$	1,000	$	—
Secured convertible promissory note		179		—
Total notes receivable	$	1,179	$	—

Stock Incentive Plan (Tables)

9 Months Ended

Sep. 30, 2022

Stock Incentive Plan

Schedule of stock option activity


	Options Outstanding
				Weighted
				Average
	Number of	Weighted		Remaining	Aggregate
	Stock Options	Average		Contractual	Intrinsic Value
	Outstanding	Exercise Price		Term (In Years)	(In Thousands)
Balance, December 31, 2021	1,356,245	$	3.30	3.97	$	119,830
Options exercised	(47,000)		2.41	—		—
Options granted	5,000		30.48	4.00		—
Balance, September 30, 2022	1,314,245	$	3.43	3.28	$	44,806
Exercisable as of September 30, 2022	1,309,245	$	3.33	3.25	$	44,806

Schedule of stock-based compensation expense


	Three months ended September 30				Nine months ended September 30,
	2022		2021		2022		2021
Engineering and Product Development	$	—		—		45	$	32
Sales and Marketing		—		—		172		105
General and Administrative		32		47		491		545
Total	$	32	$	47	$	708	$	682

Stock Incentive Plan - Additional information (Details) $ in Thousands		1 Months Ended	3 Months Ended		9 Months Ended
	May 17, 2022 shares	Oct. 31, 2015 shares	Sep. 30, 2022 USD ($) shares	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) employee shares	Sep. 30, 2021 USD ($) employee shares	Jan. 01, 2022 shares	Sep. 30, 2014 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense \| $			$ 32	$ 47	$ 708	$ 682
Number of stock option granted					5,000	0
Aggregate of shares granted fully vested stock awards					10,482	5,516
Number of non-employees \| employee					1	1
Fair value of stock awards on grant date \| $					$ 698	$ 537
Net shares issued after deducting taxes paid on granted shares					8,772
2014 Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock option granted	5,000
2014 Stock Incentive Plan \| Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future stock-based compensation grants			1,472,319		1,472,319
Maximum number of shares issued pursuant to awards granted under plan			3,315,203		3,315,203			450,000
Maximum term of stock option grants					10 years
Number of share reserve approved		1,500,000
Number of shares increase in share reserve							270,338
Percentage of shares reserve increased		4.00%
Weighted average period of unvested stock awards					3 years 4 months 24 days
Total number of unvested shares			3,315,203		3,315,203
2007 Key Person Stock Option Plan \| Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future stock-based compensation grants			0		0

Stock Incentive plan -Stock option Assumptions (Details) - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended
	May 17, 2022	Sep. 30, 2022	Sep. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted		5,000	0
Exercise price		$ 30.48
2014 Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted	5,000
Share-Based Payment Arrangement, Grantee Status [Extensible Enumeration]	us-gaap:ShareBasedPaymentArrangementEmployeeMember
Exercise price	$ 30.48
Share based compensation, options pricing model value	$ 22.27
Share based compensation, expected price volatility	78.60%
Share based compensation, risk-free interest rate	2.884%
Share based compensation, weighted average expected life (in years)	7 years
Forfeiture rate	0.00%
Share based compensation, expected dividend yield	0.00%
2014 Stock Incentive Plan \| Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of unvested stock options		$ 101
Weighted average period of unvested stock awards		3 years 4 months 24 days

Stock Incentive Plan - Stock-based compensation - Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 32	$ 47	$ 708	$ 682
Engineering and Product Development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense			45	32
Sales and Marketing
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense			172	105
General and Administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 32	$ 47	$ 491	$ 545

Assets for Lease, net - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Assets for Lease, net
Lease revenue	$ 8,621	$ 7,844	$ 25,058	$ 22,656
Operating Lease, Lease Income, Statement of Income or Comprehensive Income [Extensible Enumeration]	Revenue from Contract with Customer, Excluding Assessed Tax	Revenue from Contract with Customer, Excluding Assessed Tax	Revenue from Contract with Customer, Excluding Assessed Tax	Revenue from Contract with Customer, Excluding Assessed Tax
Depreciation expense	$ 103	$ 111	$ 315	$ 334
Reduction to accumulated depreciation for returned and retired items	448	48	594	239
Loss on disposal of assets for lease	$ (82)	$ (97)	$ (303)	$ (221)

Concentration of Credit Risk (Details) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
Concentration of Credit Risk (Details) $ in Millions	Sep. 30, 2022 USD ($) customer	Sep. 30, 2021 customer	Sep. 30, 2022 USD ($) customer item	Sep. 30, 2021 customer	Dec. 31, 2021 customer item
Customer concentration risk \| Revenue
Concentration of Credit Risk
Number of customers \| customer	2	2	2	2
Customer concentration risk \| Revenue \| Customer one
Concentration of Credit Risk
Concentration risk percentage	41.20%	39.70%	39.90%	38.60%
Customer concentration risk \| Revenue \| Customer two
Concentration of Credit Risk
Concentration risk percentage	26.20%	27.90%	30.10%	30.50%
Customer concentration risk \| Accounts receivable
Concentration of Credit Risk
Number of customers \| customer			3		3
Customer concentration risk \| Accounts receivable \| Customer one
Concentration of Credit Risk
Concentration risk percentage			30.30%		21.90%
Customer concentration risk \| Accounts receivable \| Customer two
Concentration of Credit Risk
Concentration risk percentage			26.30%		20.10%
Customer concentration risk \| Accounts receivable \| Customer three
Concentration of Credit Risk
Concentration risk percentage			13.00%		16.60%
Vendor concentration risk \| Accounts payable
Concentration of Credit Risk
Number of vendors \| item			2		1
Vendor concentration risk \| Accounts payable \| Vendor one
Concentration of Credit Risk
Concentration risk percentage			11.90%		14.00%
Vendor concentration risk \| Accounts payable \| Vendor two
Concentration of Credit Risk
Concentration risk percentage			11.40%
Recurring \| Level 1 \| Treasury bills
Concentration of Credit Risk
Treasury bills invested amount \| $	$ 19.9		$ 19.9
Recurring \| Level 1 \| Money Market Funds
Concentration of Credit Risk
Treasury bills invested amount \| $	$ 7.5		$ 7.5

Other Non-current assets - Schedule of other non-current assets (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Other Non-current assets
Prepaid licenses	$ 1,995
Other	272	$ 332
Total other non-current assets	$ 2,267	$ 332

Property and Equipment, net (Tables)

9 Months Ended

Sep. 30, 2022

Property and Equipment, net

Schedule of capital assets


	September 30,		December 31,
	2022		2021
Capital assets	$	1,271	$	882
Less: accumulated depreciation		(636)		(488)
Capital assets, net	$	635	$	394

Leases (Tables)

9 Months Ended

Sep. 30, 2022

Leases

Schedule of future minimum rental payments required under operating leases


	Total
2022 Remaining period	$	22
2023		90
2024		93
2025		71
Total undiscounted future minimum lease payments		276
Less: present value discount		(10)
Total lease liabilities		266
Lease expense in excess cash payment		(13)
Total ROU asset	$	253

Stock Incentive Plan

9 Months Ended

Sep. 30, 2022

Stock Incentive Plan

Stock Incentive Plan

13. Stock Incentive Plan

The Company’s stock-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of its stockholders. Stock options have been granted to employees under the stockholder-approved 2007 Key Person Stock Option Plan (“2007 Plan”) and stock options and restricted stock have been granted to employees under the stockholder-approved 2014 Stock Incentive Plan (“2014 Plan”). Stockholder approval of the 2014 Plan became effective in September 2014. The 2014 Plan originally provided that the aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2014 Plan may not exceed 450,000 shares (the “Share Reserve”), however in October 2015, the stockholders approved a 1,500,000 increase to the Share Reserve. In addition, the Share Reserve automatically increases on January 1st of each year, for a period of not more than 10 years, beginning on January 1st of the year following the year in which the 2014 Plan became effective and ending on (and including) January 1, 2024, in an amount equal to 4% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The Company’s Board of Directors may act prior to January 1st of a given year to provide that there will be no January 1st increase in the Share Reserve for such year or that the increase in the Share Reserve for such year will be a lesser number of shares of common stock than would otherwise occur. In the fourth quarter of 2020, the Board of Directors agreed not to increase the Share Reserve, and accordingly, the Share Reserve did not increase on January 1, 2021. On January 1, 2022, the Share Reserve increased by 270,338. The Share Reserve is currently 3,315,203 shares as of September 30, 2022.

In light of stockholder approval of the 2014 Plan, the Company no longer grants equity awards under the 2007 Plan. As of September 30, 2022, there were no shares available for future stock-based compensation grants under the 2007 Plan and 1,472,319 shares of an aggregate total of 3,315,203 shares were available for future stock-based compensation grants under the 2014 Plan.

Treasury Stock Acquired

On March 14, 2022, the Company’s Board of Directors authorized a share repurchase program under which it may repurchase up to $20.0 million of its outstanding common stock. Under this program the Company may purchase shares on a discretionary basis from time to time through open market purchases, privately negotiated transactions or other means, including through Rule 10b5-1 trading plans or through the use of other techniques such as accelerated share repurchases. The timing and amount of any transactions will be subject to the discretion of the Company based upon market conditions and other opportunities that it may have for the use or investment of its cash balances. The repurchase program has no expiration date, does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. The Company purchased 47,458 shares at a cost of approximately $2,045 during the three months ended September 30, 2022 and 148,500 shares at a cost of approximately $4,991 during the nine months ended September 30, 2022.

Stock Awards

The Company granted fully vested stock awards of 10,482 shares of common stock to the non-employee members of the board of directors, employees and one non-employee as compensation during the nine months ended September 30, 2022. Net shares issued after deducting taxes paid on these grants were 8,772. Fair value of these stock awards on grant date was $698. The Company granted fully vested stock awards of 5,516 shares of common stock to the non-employee members of the board of directors, employees and one non-employee as compensation during the nine months ended September 30, 2021. Fair value of these stock awards on grant date was $537.

Stock Options

Aggregate intrinsic value represents the difference between the closing market value as of September 30, 2022 of the underlying common stock and the exercise price of outstanding, in-the-money options. A summary of the Company’s stock option activity and related information for the nine months ended September 30, 2022 is as follows:


	Options Outstanding
				Weighted
				Average
	Number of	Weighted		Remaining	Aggregate
	Stock Options	Average		Contractual	Intrinsic Value
	Outstanding	Exercise Price		Term (In Years)	(In Thousands)
Balance, December 31, 2021	1,356,245	$	3.30	3.97	$	119,830
Options exercised	(47,000)		2.41	—		—
Options granted	5,000		30.48	4.00		—
Balance, September 30, 2022	1,314,245	$	3.43	3.28	$	44,806
Exercisable as of September 30, 2022	1,309,245	$	3.33	3.25	$	44,806

On May 17, 2022 the Company awarded 5,000 options to an employee as compensation pursuant to the 2014 Plan with an exercise price of $30.48 and Black-Scholes options pricing model value of $22.27. In applying the Black-Scholes options pricing model, following assumptions were used: 1) expected price volatility of 78.6%; risk-free interest rate of 2.884%; weighted average expected life of 7 years; zero forefeiture rate and no dividend yield. 1/4th of these options are vested one year after the grant date and 1/48th for each month thereafter contingent upon the participant’s continued service beginning on the initial vesting date and ending when the Vested Ratio equals 1/1. As of September 30, 2022, the fair value of unvested stock options was approximately $101. This unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 3.4 years.

No options were granted during the nine months ended September 30, 2021.

The Company has recorded an expense of $32 and $47 as it relates to stock-based compensation for the three months ended September 30, 2022 and 2021, respectively. The Company has recorded an expense of $708 and $682 as it relates to stock-based compensation for the nine months ended September 30, 2022 and 2021, respectively:


	Three months ended September 30				Nine months ended September 30,
	2022		2021		2022		2021
Engineering and Product Development	$	—		—		45	$	32
Sales and Marketing		—		—		172		105
General and Administrative		32		47		491		545
Total	$	32	$	47	$	708	$	682

Property and Equipment, net

9 Months Ended

Sep. 30, 2022

Property and Equipment, net

Property and Equipment, net

5. Property and Equipment, net

Capital assets consist of the following:


	September 30,		December 31,
	2022		2021
Capital assets	$	1,271	$	882
Less: accumulated depreciation		(636)		(488)
Capital assets, net	$	635	$	394

Depreciation expense amounted to $50 and $49 for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense amounted to $147 and $136 for the nine months ended September 30, 2022 and 2021, respectively.

Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Inventory
Inventory balance	$ 511	$ 550

Assets for Lease, net (Tables)

9 Months Ended

Sep. 30, 2022

Assets for Lease, net

Summary of assets for lease, net


	September 30,		December 31,
	2022		2021
Assets for lease	$	3,305	$	3,241
Less: accumulated depreciation		(1,319)		(1,598)
Assets for lease, net	$	1,986	$	1,643

Long-Term Investments (Tables)

9 Months Ended

Sep. 30, 2022

Long-Term Investments.

Schedule of long term investments


	September 30,		December 31,
	2022		2021
Investments in Synaps Dx	$	512	$	512
Investments in Mellitus Health Inc.		309		309
Total	$	821	$	821

Net Income Per Share, Basic and Diluted - Additional Information (Details) - shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Common Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Securities excluded from the computation of diluted net income per share		0
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Securities excluded from the computation of diluted net income per share	5,000

Net Income Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Net Income Per Share, Basic and Diluted
Basic shares (in shares)	6,678,175	6,754,526	6,738,717	6,722,858
Common stock warrants (in shares)	67,932	73,922	69,068	73,736
Common stock options (in shares)	1,193,819	1,314,929	1,219,486	1,338,743
Diluted shares (in shares)	7,939,926	8,143,377	8,027,271	8,135,337
Net Income - Basic EPS	$ 3,675	$ 4,150	$ 11,109	$ 15,715
Net Income - Common stock warrants	0	0	0	0
Net Income - Common stock options	0	0	0	0
Net Income - Diluted EPS	$ 3,675	$ 4,150	$ 11,109	$ 15,715
Basic EPS (in dollars per share)	$ 0.55	$ 0.61	$ 1.65	$ 2.34
Diluted EPS (in dollars per share)	$ 0.46	$ 0.51	$ 1.38	$ 1.93

Basis of Presentation (Policies)	9 Months Ended
Basis of Presentation (Policies)	Sep. 30, 2022
Basis of Presentation
Basis of Presentation	Semler Scientific, Inc., a Delaware corporation (“Semler” or “the Company”), prepared the unaudited interim financial statements included in this report in accordance with United States generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 4, 2022 (the “Annual Report”). In the opinion of management, these financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for any future period, including the full year.
COVID-19	COVID-19 In 2021, variable fee license revenues (fee-per-test), which grew strongly in the first half of 2021, decreased subsequently in the second half of 2021. The Company believes this new pattern in the home-testing market is due to a change in the behavior of insurance plans when ordering QuantaFlo testing from its health risk assessment customers. The extent and duration of the pandemic is still unknown due to new variants spreading, and the future effects of the new variants on the Company’s business are uncertain and difficult to predict. The Company is continuing to monitor the events and circumstances surrounding the COVID-19 pandemic, which may require adjustments to the Company’s estimates and assumptions in the future. As the Company looks forward into the remaining three months of 2022 and first half of 2023, there is continued uncertainty as recent outbreaks of new variants have occurred and vaccination rates lag in certain jurisdictions. New, additional or different restrictions could be imposed, which could impact the usage of its product by its customers, or further impact the timing of demand for its products. Other customers who have fixed-fee licenses could decide to cancel their licenses if they are not able to use the Company’s device as frequently as they had anticipated in light of such restrictions.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements Accounting Pronouncements Recently Adopted In May 2021, the financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This update provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. This update is effective for the Company’s fiscal years beginning after December 15, 2021. The Company adopted this ASU prospectively effective January 1, 2022 and determined that the adoption of this new accounting standard did not have a material impact on its financial statements. In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. This update addresses stakeholders’ concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: i) The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3, ii) the lessor would have otherwise recognized a day-one loss. This update is effective for the Company’s fiscal years beginning after December 15, 2021. The Company adopted this ASU prospectively to the leases that commence or modified on or after January 1, 2022 and determined that the adoption of this new accounting standard did not have a material impact on its financial statements. In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This ASU increases the transparency of government assistance to include the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements. The guidance in ASU 2021-10 is effective for financial statements of all entities, including private companies, for annual periods beginning after December 15, 2021, with early application permitted. Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date. The Company adopted ASU No. 2021-10 prospectively to the government assistance received after January 1, 2022 and determined that the adoption of this new accounting standard did not have a material impact on its financial statements. Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Topic 326”). This ASU requires timelier recording of credit losses on loans and other financial instruments held. Instead of reserves based on a current probability analysis, Topic 326 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. All organizations will now use forward-looking information to better inform their credit loss estimates. Topic 326 requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide information about the amounts recorded in the financial statements. In addition, Topic 326 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326 Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to introduce amendments which will affect the recognition and measurement of financial instruments, including derivatives and hedging. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments – Credit Losses (Topic 326); Targeted Transition Relief. The amendments in this ASU provide entities that have certain instruments within the scope of Subtopic 326-20 with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments upon adoption of Topic 326. This standard and related amendments are effective for the Company’s fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company will adopt the new standard in the first quarter of fiscal year 2023. While the Company is evaluating the effect of adopting this new accounting guidance its effect will largely depend on the composition and credit quality of the Company's portfolio of financial assets and the economic conditions at the time of adoption. In March 2020, FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. This ASU improves and clarifies various financial instruments topics, including the current expected credit losses standard issued in 2016 (ASU No. 2016-13). The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments have different effective dates. The issues 1-5 are conforming amendments, which are effective upon issuance of this final update. The Company determined that issues 1-5 have no impact on its financials. The amendments related to issue 6 and 7 effect ASU No. 2016-13, Financial instruments – credit losses (Topic 326): measurement of credit losses on financial statements. Effective dates of issue 6 and 7 are the same as the effective date of ASU No. 2016-13. The Company will adopt the new standard in the first quarter of fiscal year 2023. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company's financial statements. In October 2021, the FASB issued ASU No.2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. For public business entities, this guidance will be effective for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years. For all other entities, this guidance is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years. This ASU should be applied prospectively to all business combinations in the year of adoption. The Company will adopt the new standard in the first quarter of fiscal year 2023. The Company does not expect the adoption of this standard will have a material impact on its financial statements. In March 2022, the FASB issued ASU No.2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the troubled debt restructuring accounting model in Accounting Standards Codification (“ASC”) 310-40 for creditors that have adopted the guidance on measurement of credit losses in ASU 2016-13. Additionally, the ASU requires the public business entities to disclose current period gross writeoffs by year of origination for financing receivables and net investments in leases as part of their vintage disclosures under ASC 326. For entities that have adopted the amendments in ASU 2026-13, the amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For entities that have not yet adopted the amendments in ASU 2016-13, the effective dates are the same as effective dates in ASU 2016-13. The Company will adopt this ASU along with ASU 2016-13 in the first quarter of 2023. The Company does not expect the adoption of this standard will have a material impact on its financial statements.

Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies.

Commitments and Contingencies

12. Commitments and Contingencies

Facilities Leases

On July 31, 2020, the Company entered into a 61-month lease agreement for office space to use, as necessary, for office administration, lab space and assembly and storage purposes, located in Santa Clara, California. The Company took possession of the leased office space in September 2020, and the lease is effective through September 30, 2025. See Note 11 to the Unaudited Condensed Financial Statements for the details.

Indemnification Obligations

The Company enters into agreements with customers, partners, lenders, consultants, lessors, contractors, sales representatives and parties to certain transactions in the ordinary course of the Company’s business. These agreements may require the Company to indemnify the other party against third party claims alleging that its product infringes a patent or copyright. Certain of these agreements require the Company to indemnify the other party against losses arising from: a breach of representations or covenants, claims relating to property damage, personal injury or acts or omissions of the Company, its employees, agents or representatives. The Company has also agreed to indemnify the directors and certain of the officers and employees in accordance with the by-laws of the Company. These indemnification provisions will vary based upon the nature and terms of the agreements. In many cases, these indemnification provisions do not contain limits on the Company’s liability, and the occurrence of contingent events that will trigger payment under these indemnities is difficult to predict. As a result, the Company cannot estimate its potential liability under these indemnities. The Company believes that the likelihood of conditions arising that would trigger these indemnities is remote and, historically, the Company has not made any significant payment under such indemnification provisions. Accordingly, the Company has not recorded any liabilities relating to these agreements. In certain cases, the Company has recourse against third parties with respect to the aforesaid indemnities, and the Company believes it maintains adequate levels of insurance coverage to protect the Company with respect to potential claims arising from such agreements.

401(K) Plan

Effective January 1, 2022, the Company started to match 50% of employee’s 401(k) deferral up to a maximum of 6% of the employee’s eligible earnings.

Other

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides for an employee retention payroll tax credit for certain employers, which is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020 and before December 31, 2021. For each employee, wages (including health plan costs) up to $10,000 can be counted to determine the amount of the 50% credit. The Company started claiming this credit on its July 2020 payroll until mid-April 2021 when it determined that it no longer qualified given the change in government restrictions on travel that had impacted its sales activities. The Company’s determination that it qualified to claim the employee retention payroll tax credit is subjective and subject to audit by the Internal Revenue Service (“IRS”). If the IRS were to disagree with the Company’s tax position, it could be required to pay the retention credit claimed, along with penalties. As of December 31, 2021, the Company has claimed $1.24 million in this retention credit.

Litigation

From time to time in the normal course of business, the Company is subject to various legal matters such as threatened or pending claims or litigation. Although the results of claims and litigation cannot be predicted with certainty, the Company does not believe it is a party to any claim or litigation the outcome of which, if determined adversely to it, would individually or in the aggregate be reasonably expected to have a material adverse effect on its results of operations or financial condition.

Stock Incentive Plan - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Number of Stock Options Outstanding
Balance, Beginning	1,356,245
Options exercised	(47,000)
Options granted	5,000	0
Balance, Ending	1,314,245		1,356,245
Exercisable, Ending	1,309,245
Weighted Average Exercise Price
Balance, Beginning	$ 3.30
Options exercised	2.41
Options granted	30.48
Balance, Ending	3.43		$ 3.30
Exercisable, Ending	$ 3.33
Weighted Average Remaining Contractual Term, Options Outstanding (in years)	3 years 3 months 10 days		3 years 11 months 19 days
Weighted Average Remaining Contractual Term, Options granted (in years)	4 years
Weighted Average Remaining Contractual Term, Options Exercisable (in years)	3 years 3 months
Aggregate Intrinsic Value, Options Outstanding	$ 44,806		$ 119,830
Aggregate Intrinsic Value, Options Exercisable	$ 44,806

Condensed Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Condensed Statements of Income - USD ($) $ in Thousands	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Condensed Statements of Income
Revenues	$ 14,047	$ 13,991	$ 42,891	$ 41,485
Operating expenses:
Cost of revenues	1,138	1,382	3,070	3,957
Engineering and product development	1,244	1,036	3,444	2,676
Sales and marketing	4,153	3,968	13,031	10,407
General and administrative	3,045	2,352	9,760	6,710
Total operating expenses	9,580	8,738	29,305	23,750
Income from operations	4,467	5,253	13,586	17,735
Interest income	137	3	151	8
Other (expenses) income	(3)	1	(2)	6
Other income	134	4	149	14
Pre-tax net income	4,601	5,257	13,735	17,749
Income tax provision	926	1,107	2,626	2,034
Net income	$ 3,675	$ 4,150	$ 11,109	$ 15,715
Net income per share, basic	$ 0.55	$ 0.61	$ 1.65	$ 2.34
Weighted average number of shares used in computing basic income per share	6,678,175	6,754,526	6,738,717	6,722,858
Net income per share, diluted	$ 0.46	$ 0.51	$ 1.38	$ 1.93
Weighted average number of shares used in computing diluted income per share	7,939,926	8,143,377	8,027,271	8,135,337

Notes Receivable

9 Months Ended

Sep. 30, 2022

Notes Receivable

Notes Receivable

7. Notes Receivable

Notes receivable consist of the following for the periods presented:


	September 30,		December 31,
	2022		2021
Senior secured promissory notes	$	1,000	$	—
Secured convertible promissory note		179		—
Total notes receivable	$	1,179	$	—

In June 2022, the Company loaned Mellitus an aggregate of $1,000 through the purchase of two senior secured promissory notes that bear interest at a rate of 5% per annum, and mature in three years unless accelerated due to an event of default as provided in the notes. Repayment of notes is secured by a first priority interest in all of Mellitus’ assets.

In May 2022, to facilitate the subordination of such notes in connection with the purchase of the senior secured notes, the Company acquired $179 aggregate principal amount of outstanding convertible notes of Mellitus, which, as amended, mature July 5, 2025, if not automatically converted into preferred stock prior thereto. This note bears an interest rate of 10% per annum.

The Company accrued interest income of $17 and $20 for the three and nine months ended September 30, 2022. This interest is included in prepaid and other current assets.

Net Income Per Share, Basic and Diluted

9 Months Ended

Sep. 30, 2022

Net Income Per Share, Basic and Diluted

Net Income Per Share, Basic and Diluted

15. Net Income Per Share, Basic and Diluted

Basic earnings per share (“EPS”) represent net income attributable to common stockholders divided by the weighted average number of common shares outstanding during the measurement period. Diluted EPS represents net income attributable to common stockholders divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period using the treasury stock method.

Basic and diluted EPS is calculated as follows:


	Three months ended September 30,
	2022					2021
	Shares	Net Income		EPS		Shares	Net Income		EPS
Basic	6,678,175	$	3,675	$	0.55	6,754,526	$	4,150	$	0.61
Common stock warrants	67,932		—			73,922		—
Common stock options	1,193,819		—			1,314,929		—
Diluted	7,939,926	$	3,675	$	0.46	8,143,377	$	4,150	$	0.51


	Nine months ended September 30,
	2022					2021
	Shares	Net Income		EPS		Shares	Net Income		EPS
Basic	6,738,717	$	11,109	$	1.65	6,722,858	$	15,715	$	2.34
Common stock warrants	69,068		—			73,736		—
Common stock options	1,219,486		—			1,338,743		—
Diluted	8,027,271	$	11,109	$	1.38	8,135,337	$	15,715	$	1.93

As of September 30, 2022, 5,000 options related to stock awards were granted and unvested. These options were considered anti-dilutive for the computation of diluted net income per share. Hence, these options were excluded from the computation of diluted net income per share. As of September 30, 2021, there were no weighted average shares outstanding of common stock equivalents excluded from the computation of diluted net income per share.

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Income Taxes
Income tax provision	$ 926	$ 1,107	$ 2,626	$ 2,034
Effective income tax rate	20.13%	21.06%	19.12%	11.46%
Federal statutory rate	21.00%		21.00%
Unrecognized tax benefits	$ 419		$ 419		$ 476
Interest and penalty expenses related to uncertain tax positions			$ 8		$ 0

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Other Non-current assets (Tables)

9 Months Ended

Sep. 30, 2022

Other Non-current assets

Schedule of other non-current assets


	September 30,		December 31,
	2022		2021
Prepaid licenses	$	1,995	$	—
Other		272		332
Total other non-current assets	$	2,267	$	332

Property and Equipment, net (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Property and Equipment, net
Capital assets	$ 1,271	$ 882
Less: accumulated depreciation	(636)	(488)
Capital assets, net	$ 635	$ 394

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2022	Oct. 28, 2022
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-36305
Entity Registrant Name	SEMLER SCIENTIFIC, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	26-1367393
Entity Address, Address Line One	2340-2348 Walsh Avenue, Suite 2344
Entity Address, City or Town	Santa Clara
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95051
City Area Code	877
Local Phone Number	774-4211
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	SMLR
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		6,839,973
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001554859
Amendment Flag	false

Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Condensed Balance Sheets
Allowance for doubtful accounts on trade accounts receivable (in dollars)	$ 71	$ 61
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	6,879,497	6,824,380
Common stock, shares outstanding	6,665,075	6,758,458
Treasury stock, shares	214,422	65,922

Property and Equipment, net - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Property and Equipment, net
Depreciation expense	$ 50	$ 49	$ 147	$ 136

Inventory

9 Months Ended

Sep. 30, 2022

Inventory

Inventory

3. Inventory

Inventory, which is made up of finished goods, is recorded at the lower of cost or net realizable value. Cost is determined on the first-in, first-out method. The Company periodically analyzes its inventory levels to identify inventory that has a cost basis in excess of its estimated realizable value, and writes down such inventory as appropriate. Inventory balance was $511 and $550 as of September 30, 2022 and December 31, 2021, respectively.

Variably-Priced Revenue

9 Months Ended

Sep. 30, 2022

Variably-Priced Revenue

Variably-Priced Revenue

2.Variably-Priced Revenue

The Company recognizes variable-fee licenses (i.e., fee per test) and sales of hardware equipment and accessories in accordance with ASC 606. Total fees from variable-fee licenses represent approximately $4,887 and $5,847 for the three months ended September 30, 2022 and 2021, respectively. Total fees from variable-fee licenses represent approximately $16,742 and $18,009 for the nine months ended September 30, 2022 and 2021, respectively. Total sales of hardware and equipment accessories represent approximately $539 and $300 of revenues for the three months ended September 30, 2022 and 2021, respectively. Total sales of hardware and equipment accessories represent approximately $1,091 and $820 of revenues for the nine months ended September 30, 2022 and 2021, respectively. The remainder of the revenue is earned from leasing the Company's testing product for a fixed fee, which is not subject to Topic 606.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Section 50
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

Leases - Lessee Arrangements (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021	Jul. 31, 2020
Leases
Lease agreement term						61 months
Remaining lease term	3 years 3 months		3 years 3 months
Options to renew			false
Lease expenses	$ 22	$ 22	$ 66	$ 90
ROU asset	$ 253		$ 253		$ 314
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Other Assets, Noncurrent		Other Assets, Noncurrent		Other Assets, Noncurrent
Current lease liabilities	$ 84		$ 84		$ 80
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Other Liabilities, Current		Other Liabilities, Current		Other Liabilities, Current
Noncurrent lease liabilities	$ 182		$ 182		$ 245
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other Liabilities, Noncurrent		Other Liabilities, Noncurrent		Other Liabilities, Noncurrent

Leases

9 Months Ended

Sep. 30, 2022

Leases

Leases

11. Leases

As of September 30, 2022, the remaining lease term is three years and three months with no options to renew. The Company recognized facilities lease expenses of $22 and $22 for the three months ended September 30, 2022 and 2021, respectively. The Company recognized facilities lease expenses of $66 and $90 for the nine months ended September 30, 2022 and 2021, respectively.

The following table summarizes the future minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms greater than one year as of September 30, 2022:


	Total
2022 Remaining period	$	22
2023		90
2024		93
2025		71
Total undiscounted future minimum lease payments		276
Less: present value discount		(10)
Total lease liabilities		266
Lease expense in excess cash payment		(13)
Total ROU asset	$	253

As of September 30, 2022, the Company’s right-of-use (“ROU”) asset was $253, which was recorded on the Company’s balance sheet as other noncurrent assets, and the Company’s current and noncurrent lease liabilities were $84 and $182, respectively, which were recorded on the Company’s balance sheet as other short-term liabilities and other long-term liabilities, respectively. As of December 31, 2021, the Company’s ROU asset was $314, which was recorded on the Company’s balance sheet as other noncurrent assets, and the Company’s current and noncurrent lease liabilities were $80 and $245, respectively, which were recorded on the Company’s balance sheet as other short-term liabilities and other long-term liabilities, respectively.

Lease Arrangements

The Company enters into contracts with customers for the Company’s QuantaFlo product. The Company has determined these contracts meet the definition of a lease under Topic 842. The lease portfolio primarily consists of operating leases that are short-term in nature (monthly, quarterly or one year, all of which have renewal options). The Company allocates the consideration in a bundled

contract with its customers based on relative standalone selling prices of the lease and non-lease components. The Company made an accounting policy election to apply the practical expedient to not separate lease and eligible non-lease components. The lease component is the predominant component and consists of fees charged for use of the equipment over the period of the arrangement. The nature of the eligible non-lease component is primarily software support. The assets associated with these leasing arrangements are separately identified in the Balance Sheet as Assets for Lease and separately disclosed in Note 4 to the Unaudited Condensed Financial Statements.

Long-Term Investments - Additional Information (Details) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended	12 Months Ended
	Oct. 31, 2020	Sep. 30, 2022	Dec. 31, 2021	Sep. 30, 2020
Equity Securities without Readily Determinable Fair Value [Line Items]
Impairment		$ 0	$ 0
Investments in Mellitus Health Inc.
Equity Securities without Readily Determinable Fair Value [Line Items]
Amount of shares purchased	$ 250
Promissory note from Synaps Dx
Equity Securities without Readily Determinable Fair Value [Line Items]
Principal amount				$ 500
Conversion value		512	512
Convertible promissory note previously issued by Mellitus
Equity Securities without Readily Determinable Fair Value [Line Items]
Purchase price	59
Principal amount	$ 50
Conversion value		$ 309	$ 309

Long-Term Investments

9 Months Ended

Sep. 30, 2022

Long-Term Investments.

Long-Term Investments

6.Long-Term Investments

Long term investments consist of the following for the periods presented:


	September 30,		December 31,
	2022		2021
Investments in Synaps Dx	$	512	$	512
Investments in Mellitus Health Inc.		309		309
Total	$	821	$	821

In September 2020, the Company acquired a promissory note from NeuroDiagnostics Inc., which is doing business as Synaps Dx (“Synaps”), in the principal amount of $500. Subsequently, in December 2020, the Company agreed to convert the promissory note, together with all accrued interest thereon, into shares of preferred stock of Synaps as repayment in full of the promissory note. The value of the note exchanged for the shares of preferred stock of Synaps held by the Company as of September 30, 2022 and December 31, 2021 was approximately $512.

In October 2020, the Company acquired from a seller a convertible promissory note previously issued by Mellitus Health Inc., (“Mellitus”) to such seller for a purchase price of $59, which represented the $50 principal amount of the note and all accrued and unpaid interest thereon.

Subsequently, in October 2020, the Company purchased $250 of shares of preferred stock of Mellitus, and in connection with such transaction, the convertible promissory note, together with all accrued interest thereon, also converted pursuant to its terms into shares of preferred stock of Mellitus as repayment in full of such convertible promissory note. The value of consideration exchanged for the shares of preferred stock of Mellitus held by the Company as of September 30, 2022 and December 31, 2021 was approximately $309.

The investments in Synaps and Mellitus securities that were retained by the Company as of September 30, 2022 were recorded in accordance with ASC 321, Investments – equity securities, which provides that investments in equity securities in privately-held companies without readily determinable fair values are generally recorded at cost, plus or minus subsequent observable price changes in orderly transactions for identical or similar investments, less impairments. The Company elected the practical expedient permitted by ASC 321 and recorded the above investments on a cost basis. As a part of the assessment for impairment indicators, the Company considers significant deterioration in the earnings performance and overall business prospects of the investee as well as significant adverse changes in the external environment these investments operate. If qualitative assessment indicates the investments are impaired, the fair value of these equity securities would be estimated, which would involve a significant degree of judgement and subjectivity. In accordance with ASC 321, the Company assessed qualitatively for impairment and determined that there was no impairment for these investments as of September 30, 2022 and December 31, 2021.

Basis of Presentation

9 Months Ended

Sep. 30, 2022

Basis of Presentation

Basis of Presentation

1. Basis of Presentation

Semler Scientific, Inc., a Delaware corporation (“Semler” or “the Company”), prepared the unaudited interim financial statements included in this report in accordance with United States generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 4, 2022 (the “Annual Report”). In the opinion of management, these financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for any future period, including the full year.

COVID-19

In 2021, variable fee license revenues (fee-per-test), which grew strongly in the first half of 2021, decreased subsequently in the second half of 2021. The Company believes this new pattern in the home-testing market is due to a change in the behavior of insurance plans when ordering QuantaFlo testing from its health risk assessment customers.

The extent and duration of the pandemic is still unknown due to new variants spreading, and the future effects of the new variants on the Company’s business are uncertain and difficult to predict. The Company is continuing to monitor the events and circumstances surrounding the COVID-19 pandemic, which may require adjustments to the Company’s estimates and assumptions in the future.

As the Company looks forward into the remaining three months of 2022 and first half of 2023, there is continued uncertainty as recent outbreaks of new variants have occurred and vaccination rates lag in certain jurisdictions. New, additional or different restrictions could be imposed, which could impact the usage of its product by its customers, or further impact the timing of demand for its products. Other customers who have fixed-fee licenses could decide to cancel their licenses if they are not able to use the Company’s device as frequently as they had anticipated in light of such restrictions.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In May 2021, the financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This update provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. This update is effective for the Company’s fiscal years beginning after December 15, 2021. The Company adopted this ASU prospectively effective January 1, 2022 and determined that the adoption of this new accounting standard did not have a material impact on its financial statements.

In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. This update addresses stakeholders’ concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: i) The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3, ii) the lessor would have otherwise recognized a day-one loss. This update is effective for the Company’s fiscal years beginning after

December 15, 2021. The Company adopted this ASU prospectively to the leases that commence or modified on or after January 1, 2022 and determined that the adoption of this new accounting standard did not have a material impact on its financial statements.

In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This ASU increases the transparency of government assistance to include the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements. The guidance in ASU 2021-10 is effective for financial statements of all entities, including private companies, for annual periods beginning after December 15, 2021, with early application permitted. Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date. The Company adopted ASU No. 2021-10 prospectively to the government assistance received after January 1, 2022 and determined that the adoption of this new accounting standard did not have a material impact on its financial statements.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Topic 326”). This ASU requires timelier recording of credit losses on loans and other financial instruments held. Instead of reserves based on a current probability analysis, Topic 326 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. All organizations will now use forward-looking information to better inform their credit loss estimates. Topic 326 requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide information about the amounts recorded in the financial statements. In addition, Topic 326 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326 Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to introduce amendments which will affect the recognition and measurement of financial instruments, including derivatives and hedging. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments – Credit Losses (Topic 326); Targeted Transition Relief. The amendments in this ASU provide entities that have certain instruments within the scope of Subtopic 326-20 with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments upon adoption of Topic 326. This standard and related amendments are effective for the Company’s fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company will adopt the new standard in the first quarter of fiscal year 2023. While the Company is evaluating the effect of adopting this new accounting guidance its effect will largely depend on the composition and credit quality of the Company's portfolio of financial assets and the economic conditions at the time of adoption.

In March 2020, FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. This ASU improves and clarifies various financial instruments topics, including the current expected credit losses standard issued in 2016 (ASU No. 2016-13). The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments have different effective dates. The issues 1-5 are conforming amendments, which are effective upon issuance of this final update. The Company determined that issues 1-5 have no impact on its financials. The amendments related to issue 6 and 7 effect ASU No. 2016-13, Financial instruments – credit losses (Topic 326): measurement of credit losses on financial statements. Effective dates of issue 6 and 7 are the same as the effective date of ASU No. 2016-13. The Company will adopt the new standard in the first quarter of fiscal year 2023. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company's financial statements.

In October 2021, the FASB issued ASU No.2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired

contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. For public business entities, this guidance will be effective for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years. For all other entities, this guidance is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years. This ASU should be applied prospectively to all business combinations in the year of adoption. The Company will adopt the new standard in the first quarter of fiscal year 2023. The Company does not expect the adoption of this standard will have a material impact on its financial statements.

In March 2022, the FASB issued ASU No.2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the troubled debt restructuring accounting model in Accounting Standards Codification (“ASC”) 310-40 for creditors that have adopted the guidance on measurement of credit losses in ASU 2016-13. Additionally, the ASU requires the public business entities to disclose current period gross writeoffs by year of origination for financing receivables and net investments in leases as part of their vintage disclosures under ASC 326. For entities that have adopted the amendments in ASU 2026-13, the amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For entities that have not yet adopted the amendments in ASU 2016-13, the effective dates are the same as effective dates in ASU 2016-13. The Company will adopt this ASU along with ASU 2016-13 in the first quarter of 2023. The Company does not expect the adoption of this standard will have a material impact on its financial statements.

Condensed Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
Condensed Statements of Cash Flows - USD ($) $ in Thousands	Sep. 30, 2022	Sep. 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 11,109	$ 15,715
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Depreciation	462	470
Deferred tax expense	(405)	774
Loss on disposal of assets for lease	303	221
Allowance for doubtful accounts	53	13
Stock-based compensation	708	682
Changes in Operating Assets and Liabilities:
Trade accounts receivable	(107)	(1,177)
Inventory	39	(1,448)
Prepaid expenses and other current assets	2,083	(3,029)
Other non-current assets	(1,934)	65
Accounts payable	40	(276)
Accrued expenses	3,217	2,506
Other current and non-current liabilities	(52)	(63)
Deferred revenue	237	(54)
Net Cash Provided by Operating Activities	15,753	14,399
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment	(388)	(261)
Notes receivable	(1,179)
Purchase of assets for lease	(961)	(341)
Net Cash Used in Investing Activities	(2,528)	(602)
CASH FLOWS FROM FINANCING ACTIVITIES:
Taxes paid related to net settlement of equity awards	(114)
Treasury stock acquired	(4,991)
Proceeds from exercise of stock options	93	54
Net Cash (Used in) Provided by Financing Activities	(5,012)	54
INCREASE IN CASH	8,213	13,851
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	37,323	22,079
CASH AND CASH EQUIVALENTS, END OF PERIOD	45,536	35,930
Supplemental Disclosure of Cash Flow Information:
Cash paid for taxes	$ 1,617	2,647
Exercised put option of 211,928 common stock in Synaps Dx for 40,922 common stock of the company		$ 2,230

Assets for Lease, net

9 Months Ended

Sep. 30, 2022

Assets for Lease, net

Assets for Lease, net

4. Assets for Lease, net

The Company enters into contracts with customers for the Company’s QuantaFlo product. The Company has determined these contracts meet the definition of a lease under Topic 842. Operating leases are short-term in nature (monthly, quarterly or one year), and all of which have renewal options. The assets that may be associated with these leasing arrangements are identified below as assets for lease. Upon shipment under operating leases, assets for lease are depreciated. During the three months ended September 30, 2022 and 2021, the Company recognized approximately $8,621 and $7,844, respectively, in lease revenues related to these arrangements. During the nine months ended September 30, 2022 and 2021, the Company recognized approximately $25,058 and $22,656, respectively, in lease revenues related to these arrangements, which is included in Revenues on the Condensed Statements of Income.

Upon shipment under variable-fee license contracts, these assets for lease are sold to the customers, and the asset is recognized as cost of revenue under ASC 606, Revenue from Contracts with Customers.

Assets for lease consist of the following:


	September 30,		December 31,
	2022		2021
Assets for lease	$	3,305	$	3,241
Less: accumulated depreciation		(1,319)		(1,598)
Assets for lease, net	$	1,986	$	1,643

Depreciation expense amounted to $103 and $111 for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense amounted to $315 and $334 for the nine months ended September 30, 2022 and 2021, respectively. Reduction to accumulated depreciation for returned and retired items was $448 and $48 for the three months ended September 30, 2022 and 2021, respectively. Reduction to accumulated depreciation for returned and retired items was $594 and $239 for the nine months ended September 30, 2022 and 2021, respectively. The Company recognized a loss on disposal of assets for lease in the amount of $82 and $97 for the three months ended September 30, 2022 and 2021, respectively. The Company recognized a loss on disposal of assets for lease in the amount of $303 and $221 for the nine months ended September 30, 2022 and 2021, respectively.

Concentration of Credit Risk

9 Months Ended

Sep. 30, 2022

Concentration of Credit Risk

Concentration of Credit Risk

10. Concentration of Credit Risk

Credit risk is the risk of loss from amounts owed by the financial counterparties. Credit risk can occur at multiple levels; as a result of broad economic conditions, challenges within specific sectors of the economy, or from issues affecting individual companies. Financial instruments that potentially subject the Company to credit risk consist of cash and accounts receivable.

The Company maintains cash with major financial institutions. The Company’s cash and cash equivalents consist of bank deposits and money market funds held with banks that, at times, exceed federally insured limits. The cash and cash equivalents also include short term treasury bills with original maturities of three months or less. The Company invested in treasury bills in the amount of $19.9 million and money market funds of $7.5 million which are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as level 1 within the fair value hierarchy. The Company limits its credit risk by

dealing with counterparties that are considered to be of high credit quality and by performing periodic evaluations of the relative credit standing of these financial institutions.

Management periodically monitors the creditworthiness of its customers and believes that it has adequately provided for any exposure to potential credit loss. For the three months ended September 30, 2022, two customers accounted for 41.2% and 26.2% of the Company’s revenues, respectively. For the three months ended September 30, 2021, two customers accounted for 39.7% and 27.9% of the Company’s revenues. For the nine months ended September 30, 2022, two customers accounted for 39.9% and 30.1%, of the Company’s revenues, respectively. For the nine months ended September 30, 2021, two customers accounted for 38.6% and 30.5% of the Company’s revenues, respectively. As of September 30, 2022, three customers accounted for 30.3%, 26.3%, and 13.0% of the Company’s accounts receivable, respectively. As of December 31, 2021, three customers accounted for 21.9%, 20.1%, and 16.6% of the Company’s accounts receivable, respectively. The Company’s largest customer in terms of both revenues and accounts receivable in the nine months ended September 30, 2022 is a U.S. diversified healthcare company and its affiliated plans.

As of September 30, 2022, two vendors accounted for 11.9% and 11.4% of the Company’s accounts payable, respectively. As of December 31, 2021, one vendor accounted for 14.0% of the Company’s accounts payable, respectively.

Net Income Per Share, Basic and Diluted (Tables)

9 Months Ended

Sep. 30, 2022

Net Income Per Share, Basic and Diluted

Schedule of basic and diluted EPS


	Three months ended September 30,
	2022					2021
	Shares	Net Income		EPS		Shares	Net Income		EPS
Basic	6,678,175	$	3,675	$	0.55	6,754,526	$	4,150	$	0.61
Common stock warrants	67,932		—			73,922		—
Common stock options	1,193,819		—			1,314,929		—
Diluted	7,939,926	$	3,675	$	0.46	8,143,377	$	4,150	$	0.51


	Nine months ended September 30,
	2022					2021
	Shares	Net Income		EPS		Shares	Net Income		EPS
Basic	6,738,717	$	11,109	$	1.65	6,722,858	$	15,715	$	2.34
Common stock warrants	69,068		—			73,736		—
Common stock options	1,219,486		—			1,338,743		—
Diluted	8,027,271	$	11,109	$	1.38	8,135,337	$	15,715	$	1.93

Condensed Statements of Stockholders Equity - USD ($) $ in Thousands	Common Stock	Treasury Stock	Additional Paid-In Capital	Retained Earnings	Total
Balance at Dec. 31, 2020	$ 7		$ 22,113	$ 7,673	$ 29,793
Balance (in shares) at Dec. 31, 2020	6,725,422
Balance (in shares) at Dec. 31, 2020		(25,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of put option in Synaps Dx			(2,230)		$ (2,230)
Exercise of put option in Synaps Dx (in Shares)		(40,922)			40,922
Employee stock grants			537		$ 537
Employee stock grants (in shares)	5,516
Stock option exercises			54		54
Stock option exercises (in shares)	92,192
Stock-based compensation			145		145
Net income				15,715	15,715
Balance at Sep. 30, 2021	$ 7		20,619	23,388	44,014
Balance (in shares) at Sep. 30, 2021	6,823,130
Balance (in shares) at Sep. 30, 2021		(65,922)
Balance at Jun. 30, 2021	$ 7		20,563	19,238	39,808
Balance (in shares) at Jun. 30, 2021	6,819,304
Balance (in shares) at Jun. 30, 2021		(65,922)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Employee stock grants (in shares)	116
Stock option exercises			9		9
Stock option exercises (in shares)	3,710
Stock-based compensation			47		47
Net income				4,150	4,150
Balance at Sep. 30, 2021	$ 7		20,619	23,388	44,014
Balance (in shares) at Sep. 30, 2021	6,823,130
Balance (in shares) at Sep. 30, 2021		(65,922)
Balance at Dec. 31, 2021	$ 7		20,645	24,895	$ 45,547
Balance (in shares) at Dec. 31, 2021	6,824,380
Balance (in shares) at Dec. 31, 2021		(65,922)			65,922
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Treasury stock acquired			(4,991)		$ (4,991)
Treasury stock acquired (in shares)		(148,500)			148,500
Employee stock grants			698		$ 698
Employee stock grants (in shares)	10,482
Taxes paid related to net share settlement of equity awards			(114)		(114)
Taxes paid related to net share settlement of equity awards (in shares)	(1,710)
Stock option exercises			93		$ 93
Stock option exercises (in shares)	46,345				47,000
Stock-based compensation			10		$ 10
Net income				11,109	11,109
Balance at Sep. 30, 2022	$ 7		16,341	36,004	$ 52,352
Balance (in shares) at Sep. 30, 2022	6,879,497
Balance (in shares) at Sep. 30, 2022		(214,422)			214,422
Balance at Jun. 30, 2022	$ 7		18,334	32,329	$ 50,670
Balance (in shares) at Jun. 30, 2022	6,864,625
Balance (in shares) at Jun. 30, 2022		(166,964)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Treasury stock acquired			(2,045)		$ (2,045)
Treasury stock acquired (in shares)		(47,458)			47,458
Employee stock grants			25		$ 25
Employee stock grants (in shares)	872
Stock option exercises			20		20
Stock option exercises (in shares)	14,000
Stock-based compensation			7		7
Net income				3,675	3,675
Balance at Sep. 30, 2022	$ 7		$ 16,341	$ 36,004	$ 52,352
Balance (in shares) at Sep. 30, 2022	6,879,497
Balance (in shares) at Sep. 30, 2022		(214,422)			214,422

Assets for Lease, net (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Assets for Lease, net
Assets for lease	$ 3,305	$ 3,241
Less: accumulated depreciation	(1,319)	(1,598)
Assets for lease, net	$ 1,986	$ 1,643